Unconditional Payment of Bank Guarantee from the Perspective of Independent Principle

Abstract

One of the governing principles to bank guarantee contracts is theindependent principle. The logical and important result of this principle isthat the obligations mentioned in the bank guarantee are autonomousfrom the basic contract and the bank considering its independentobligation against the interested party is obliged to pay the guaranteeunconditionally. This article considers doctrine views and case lawregarding the concept and scope of the independent principle. It alsoexamines the compatibility of possible exceptions to this principle, suchas fraud, with Iranian law by addressing this question: In the event of anexception, will the court be able, irrespective of the contractual nature ofindependent principle, to issue an interim order of payment prohibitionand /or attach the sum of guarantee with relief security?

Keywords

• bank guarantee
• independent principle
• basic contract
• undue demand
• unconditional